Eyes are on Yellen who is set to speak on Thursday, a week after the central bank held off on raising its benchmark interest rate, citing concern about the global economy.
The dollar shot up 2% against the Norwegian krone on the heels of the Norwegian rate cut.
Markets have sold off since Yellen said policy makers kept rates unchanged in light of heightened uncertainties overseas and the slightly lower expected path for inflation.
Confusion over the Fed’s actions has made equities more volatile in past weeks. “Yellen is caught between a rock and a hard place”. The rand weakened 0.9 per cent to 13.9936 against the dollar, approaching a record 14.0682 reached on August. 24.
Stock markets in Singapore, Malaysia and Indonesia as well as South Africa, Turkey and most countries in the Middle East were closed for holidays. Officials said lower oil prices are taking a toll on the economy, and said rates may need to move lower still.
The Japanese stock market was down 2.2% Thursday, after reopening following a three-day break.
Since the Federal Reserve’s rate decision, the Standard & Poor’s 500 Index dropped in four of five days.
Besides Yellen’s speech, there are a few key pieces of data which will be released today, including jobless claims, durable goods and new home sales. “She needs to be less dovish – it’s about time“.
“Market liquidity constraints, mixed messages from the Fed, the fallout in the EM space coupled with the lack of clarity on China and now the increasing risk of United States government shutdown all playing havoc with investor sentiment”, Brenda Kelly, head analyst at London Capital Group, said in a note to clients.
Traders are split on whether the Fed will raise rates this year.
The Fed chair will deliver a speech on “Inflation Dynamics and Monetary Policy”, scheduled for 5 p.m.in Amherst, Massachusetts.
The new forecast significantly lowered the expectation for inflation this year to show the Fed’s preferred inflation gauge rising just 0.4 percent, down from a 0.7 percent forecast in June. “They are creating the conditions that are causing the external environment to be weak, and then they say they can’t hike because of those same conditions that they have created”. Many other Asian markets were also lower. France’s CAC 40 Index added 0.1 percent, while Germany’s DAX Index gained 0.4 percent, and the UK’s FTSE 100 Index climbed 1.6 percent.
There are two remaining FOMC meetings this year.
Thursday will also see $29 billion of 7-year notes auctioned.